Fund manager wins bribery case against former chief executive

Out-Law News | 20 Jul 2018 | 3:36 pm | 3 min. read

A firm which manages money for a Libyan sovereign wealth fund has won a substantial case against its former chief executive for bribery and breaches of fiduciary duty.

The High Court found against Frederic Marino and his associate, banker Yoshiki Ohmura, in respect of all claims brought against them by FM Capital Partners (FMCP), which manages assets on behalf of the Libya Africa Investment Portfolio (LAP). The court also dismissed a claim by Ohmura that Swiss law should apply to the case, on the grounds that the "centre of gravity" of the wrongdoing in the case was in England.

FMCP alleged that Marino and Ohmura funnelled substantial amounts of money away from the business between 2009 and 2014, by way of a series of large investments of LAP assets in certain financial products offered by Ohmura's employer; trades with third parties allegedly controlled by Marino and Ohmura; and secret commissions. Marino was suspended from FMCP in 2014, when the firm began its own investigation and reported the matter to the UK's National Crime Agency (NCA) and Financial Conduct Authority (FCA).

Mrs Justice Cockerill concluded that Marino was liable in breach of fiduciary duty, dishonest assistance and bribery as a matter of English law; while Ohmura was liable in dishonest assistance and bribery. Although she concluded that the proper law of the claims was English law, Ohmura would also have been liable as an accessory to Marino and a colleague's liability for criminal mismanagement as a matter of Swiss law, but would not have been liable in bribery.

The lengthy judgment is a useful one, as it sets out in detail the legal tests for various common civil fraud claims, according to civil fraud and asset recovery expert Jennifer Craven of Pinsent Masons, the law firm behind Out-Law.com.

"The judgment is a helpful one to fraud practitioners and victims of fraud alike as Mrs Justice Cockerill sets out a detailed discussion of the legal tests for claims in breach of fiduciary duty, dishonest assistance, knowing receipt, bribery and conspiracy," she said. "It also sends out a clear message to those in positions of trust, in particular directors of companies, that where those positions are abused, conflicts of interest are not disclosed and bribes and paid and received, the court will take a very dim view and will ensure that the fraudsters are held to account."

"Interestingly in this case, FMCP was successful even though the only witness called to give evidence on its behalf was an individual not involved in the key events taking place at the relevant time. Whilst acknowledging the law which permitted her to draw negative inferences, Mrs Justice Cockerill ruled that the defendants had no established any sort of case that one or more of the witnesses would have had relevant evidence to give. This is a clear example of how the courts are unlikely to undertake the process of drawing negative inferences lightly, unless evidence is adduced by the party who seeks the negative inference on the matter in issue," she said.

FMCP, of which Marino was co-founder, runs a series of funds worth around $550 million on behalf of the LAP. It is majority-owned by LAP, and at all relevant times LAP was its only client.

The defendants attempted to argue that this had profound implications for the litigation, particularly in terms of disclosure; and that therefore witnesses should be called from LAP, even though they conceded that they had no sensible way of joining LAP to the proceedings. Marino also argued that there were a number of witnesses who would reveal that they gave consent to various payments made to him, which were being challenged as part of the case.

The judgment also contained some interesting discussion on what the 'nexus' has to be between the payer of a bribe and the 'victim' of the bribery before the law on bribery can be engaged. The legal test for bribery, as established by the then Mr Justice Leggatt in the 1990 case of Anangel Atlas v Ishikawajima-HHI, defines a bribe as "a commission or other inducement which is given by the third party to an agent, and which is secret from the principle".

The defendants in this case argued that the law of bribery could only be engaged where the alleged bribe was made by someone who intends to do business with the alleged victim. However, Mrs Justice Cockerill preferred the argument put forward by FMCP, that the procurer of a bribe need not be acting in his capacity as an agent of the principle provided that the relevant dealing gives rise to a real possibility of conflict of interest.

"Mrs Justice Cockerill ruled that even where there was no contractual nexus between Ohmura or Conquest, the company from which the payment of the bribe was made, and FMCP, the payments were made to Marino as agent 'as such'," said Jennifer Craven. "This was because, on the facts, there was evidence of relevant dealing between Ohmura and FMCP."

"The judge also dismissed any submission that because the payment came directly from Conquest, the elements of bribery could be sidestepped; stating that 'the source from which the money comes need not be the briber himself or directly," she said.